Empirical Study On The Relationship Between Financial Development And Urban-Rural Income Gap In Inner Mongolia

With further advances of supply side reform under new normal economy,the gap between the urban and rural income is narrowing,but the rate is far below the national average,which becomes the major factor of restraining the integrated development of the whole area.This gap is not only an issue of income distribution but also of resource allocation.As the core of the resource allocation in modern economy,the financial system has the natural function of income distribution.Therefore,it is essential to realize the integrated development by exploring the relationship between the financial improvement and the rural and urban gap in Inner Mongolia.Based on the national and international bibliography,this thesis has first analyzed how the financial advancement affects the gap from four levels--disequilibrium effect,threshold effect,poverty relief effect and driving effect.Secondly,the current financial situation in Inner Mongolia has been analyzed and the fact that the financial development in this area is relatively in a low level and that the banks dominate have been discovered.Thirdly,after the current situation of the income gap has been investigated,it is found that the periodical variation of the income gap is obvious,especially in recent years,when the ratio of the income declines significantly.Fourthly,this essay justifies the above-mentioned relationship by constructing the vector auto-regression model,unit root test,co-integration test,Granger causality test,impulse response and variance decomposition used.It is proved out that the scale of the financial development in Inner Mongolia leads to the widened gap,whereas financial efficiency acts positively on the convergence of the gap.Finally,this thesis proposes some policies on the gap narrowing in terms of optimizing the financial system,improving financial efficiency and coordinating urban and rural development.